Cost effective environment

Latvia offers significant cost advantages to investors, including competitive labour and real estate expenses, as well as competitive tax rates. Coupled with strong productivity in manufacturing and services, Latvia provides investors with a highly cost-effective environment for business, producing compelling returns on investment.

Five Latvian cities ranked in the top 10 in many categories of the annual fDi Intelligence report, “fDi European Cities and Regions of the Future 2018/19 Rankings”. The capital of Latvia - Riga, along with Jelgava, Rezekne, Valmiera and the port city Ventspils convincingly occupy top spots in cost-effectiveness, connectivity and foreign direct investment (FDI) strategy.

Latvia offers an internationally competitive workforce at every level of expertise and very competitive costs. Latvia is among the leading countries in Europe in wage adjusted labour productivity (labour productivity by average personnel costs, according to Eurostat data).

Labour expenses

Latvia’s labour costs are very competitive, especially comparing to those in older EU-member countries (5th lowest labour costs per hour in EU. Source: Eurostat). For example, Germany’s labour costs are approximately four times higher than in Latvia. Average salary rates depending on industry and job title can be obtained by contacting LIAA Investment Promotion Division.

Real estate

As a country with a relatively low density of population, Latvia can provide location choices for both industrial and office operations. There are several vacant factory buildings in all the largest cities, along with historic city centres that are gradually developing new functions, evolving from residential into commercial, entertainment, and shopping areas. In addition to the availability of individual properties, several business-hosting parks have been established or are being developed for different types of tenants. 

Special economic zones

Latvia has 5 free economic zones (Riga, Ventspils, Liepaja, Rezekne and Latgale) that benefit entrepreneurs. The main benefits for companies operating in Free Ports and SEZ territories are tax rebates on the real estate tax, corporate income tax (applies in case of withdrawal of dividends, otherwise - CIT in Latvia is 0%). 

Tax rates

From 1 January 2018, Latvia has a new corporate income tax (CIT) under which retained earnings are exempt from CIT, and only distributions are taxed. The CIT rate on gross profit distribution is 20%. Latvia also has a progressive personal income tax (PIT). Income below EUR 20 004 a year is subject to PIT at the rate of 20%. Income from EUR 20 004 to EUR 55 000 a year is subject to PIT at the rate of 23%. The part of income exceeding EUR 55 000 a year is subject to PIT at the rate of 31.4%. PIT for income from capital and capital gains is 20%.

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